The perception of easy money in the property market has proved a distraction for technology entrepreneurs who might otherwise have gone on to set up further technology businesses, delegates at a private equity conference heard yesterday.

Addressing the InterTrade Ireland conference, Bernard Hensey, chairman of the R&D committee of the Irish Software Association (ISA), said entrepreneurs who have been "lost to property" must be encouraged to engage once more in the start-up arena. Mr Hensey added that a recent ISA study found that the State's R&D funding process was convoluted and focused on the retention of multinationals, rather than being entrepreneur-friendly.

However, he noted that there had been a change in the R&D landscape recently and said that the Government was "making a huge bet" on R&D.

The venture capital (VC) community must be "reinvigorated" by maximising the shareholder returns delivered by technology start-ups, he added.

The State needed to improve its game in the networking area, he added, and must encourage communication between start-ups and venture capitalists.

John Tracey, chief executive of Trinity Venture Capital, said the the level of business experience in the State "gives us the edge", referring to entrepreneurs who originally founded businesses in the 1980s and have since moved on to their second or third start-up.

From a VC perspective, people were all-important, Mr Tracy explained. "We would rather back a good management team with a mediocre product, than a mediocre management team with a good product," he said.

He noted that Ireland attracted a disproportionate amount of international VC investment'. This was due to our entrepreneurial attitude and outward focus, he said. International investors were also impressed by the level of ambition, confidence and determination in the State.

He advised Irish companies to follow the US example, and focus on scaling up and achieving market domination through acquisition, rather than relying solely on organic growth.